Beijing is promoting supply-side structural reform as a solution to industrial capacity and cutting its reliance on debt-driven growth policies. (Reuters)

China’s top banking regulator has told banks to reform by tackling China’s “zombie firms”, control regional housing market bubbles and push forward with debt to equity swaps, according to a statement posted on the regulator’s website late Friday.

Guo Shuqing, who was appointed chairman of China’s banking regulator in February, met with representatives from a number of the country’s largest commercial banks on Friday to check up on their progress implementing the central government’s reform agenda.

Beijing is promoting supply-side structural reform as a solution to industrial capacity and cutting its reliance on debt-driven growth policies. Guo has vowed to clean up “chaos” in the country’s banking system.

“We must deepen the development of debt-to-equity swaps governed by the market and law, actively and dependably promote de-leveraging,” Guo said, according to the statement.

As part of the drive to tackle overcapacity in the industrial sector, he said banks should focus on the issue of loss-making “zombie” companies, propped up by subsidies and preferential loans.

Guo made the comments at the headquarters of the Agricultural Bank of China in Beijing. Representatives from the Construction Bank of China, CITIC Bank and five other banks also attended.

Chinese President Xi Jinping in April called on China’s regulator’s to ward off systemic risks in the financial system.

The banking regulator in May released a unveiled a long list of rules it aims to publish this year to counter risks, including scrutiny on debt-for-equity swaps and regulations on bankruptcy for commercial lenders.